Updated: September 18, 2021 11:02:04 am
To prevent revenue leakage from the tax payable by restaurants in the country, the GST Council Friday approved a proposal to make food-delivery platforms like Zomato and Swiggy responsible for collecting and depositing the 5 per cent GST applicable on food with the government, effective January 1.
Even as the move may push tax collections from restaurants, it may cause an increase in compliance burden for restaurants as well as the food-aggregators. Most significantly, tax experts pointed out, the move may result in restaurants having to keep two separate books of accounts — one for their normal business and one for what they supply through online platforms.
Particularly, the move may impact restaurants with annual turnover less than Rs 20 lakh and were not liable to pay GST. “In essence, the compliance burden is likely to be shifted to food aggregators. From a consumer perspective, there should not be a material change because consumer will still pay 5 per cent GST on food. Small restaurants, which have less than Rs 20 lakh of turnover, are exempt from GST but if food-aggregators are made responsible, perhaps GST will be applicable on the smaller restaurants too,” Pratik Jain, partner, Price Waterhouse & Co, LLP said.
The pandemic proved to be a shot in the arm for food-delivery platforms and the delivery segment for restaurants with the order volumes for aggregators like Zomato and Swiggy surging to 120 per cent of pre-covid levels towards the end of last year, after the initial lockdowns. This also translated in higher delivery business for restaurants.
A Gurugram-based executive said the food-delivery companies are likely to seek meetings with the government in the coming week to get clarifications on certain issues like how the input tax credit will be applicable. However, the biggest red-flag in the process will be for restaurants opting for the composition scheme, through which smaller players can get rid of GST formalities.
“While food delivery services would constitute e-commerce services, sufficient safeguards need to be taken in subjecting them to GST to ensure that smaller food outlets are protected and consumers do not end up paying more,” MS Mani, Senior Director, Deloitte India said. A senior Finance Ministry official said: “With respect to aggregator, it does not matter whether it is composition or not. It will get excluded from the turnover of the restaurant and aggregator will pay”. “Actually even when they were supplying through Swiggy/Zomato, they should have registered as Swiggy/Zomato to deduct 1 per cent TCS, but it was not happening. These platforms will have to make changes in their systems. It will require some time,” the official added.
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